SE Asian monies defy recent trading patterns
SE Asian monies defy recent trading patterns
SINGAPORE (Dow Jones): Currencies in Southeast Asia defied recent trading patterns during Asian hours on Wednesday, as the baht and the Singapore dollar strengthened despite a sharp fall in Japanese yen.
Regional currencies elsewhere in Asia failed to buck the yen's trend, however, as the Philippine peso, South Korean won and New Taiwan dollar all lost ground against the U.S. dollar.
The Indonesian rupiah ended little changed, affected by neither the fall of the yen nor the announcement from Paris that the Indonesian government had struck a deal with its creditors to reschedule US$4.2 billion of sovereign debt.
Overall, regional foreign exchange volumes remained paper thin, with little trading interest seen.
Lack of interest kept the Singapore dollar tightly range- bound, with the local currency strengthening slightly against the U.S. dollar despite the U.S. currency's rally above Y136. Late in Asian dealing the U.S. dollar was quoted at S$1.7289, down from S$1.7350 the day before.
Traders in Singapore were divided over the reason behind the local dollar's unexpected strength. Some attributed its buoyancy to market players buying the currency in the cross market against the yen to close out existing short Singapore dollar/long yen positions dating from the yen's rally earlier in the month.
The baht also rose Wednesday, with one trader at a Thai bank crediting the rally to the absence from the market of holidaying Japanese investors.
Late in Asian trading, the U.S. dollar was quoted at 40.4900 baht, down from 40.6550 baht late Tuesday.
After falling in recent days, the won (KRW) weakened further during Wednesday's session, with the U.S. dollar closing above the key psychological barrier of 1,400 won, as banks and corporations continued to chase U.S. dollars to meet impending debt repayments.
At the close of domestic trading in Seoul, the U.S. dollar was quoted at 1,402.50 won, up from 1,400 won at the previous close.
Slip
Undermined by the weakening yen, the New Taiwan dollar also slipped, with the U.S. dollar rising to close at NT$34.638, up from NT$34.572 the day before.
The Philippine peso, too, dropped against the U.S. dollar as the plight of Philippine Airlines continued to exact a heavy toll in the foreign exchange market. By the close of dealing on Wednesday, the peso had fallen nearly 2 percent against the U.S. dollar from its level in the previous week, before management first proposed winding up the stricken carrier.
"There is no firm support for the peso," said one analyst, citing market fears that the collapse of the national airline will have repercussions on the balance sheet strength of Philippine banks.
At the close of trading on the Philippine Dealing System, the U.S. dollar was quoted at 44.590 peso, up from 44.375 peso the previous day.
Despite falls elsewhere in the region, the rupiah was barely changed on Wednesday, although analysts hesitated to attribute the currency's stability to the debt restructuring deal hammered out in Paris.
"This won't affect flows," said David Fernandez, regional economist at J.P. Morgan in Singapore. "The market wasn't expecting any significant flow of funds out of Indonesia anyway, and the debt rescheduling merely makes those expectations more concrete."
Although inflows of assistance funding from supranational agencies and bilateral donors are supporting the rupiah, the market will continue to place a political risk premium on the Indonesian currency that is likely to keep the dollar trading above 10,000 rupiah, said Fernandez.
And while the Indonesian authorities have strenuously denied that they plan to introduce capital controls, few market players are tempted to buy the rupiah for the handsome yields it offers, lest they are caught long.
"For those who don't see Bank Indonesia imposing capital controls, going long the rupiah is a good play," said another analyst. "A lot of people were doing it, but they have stayed away ever since the rumors of capital controls began to circulate."
"Yields of 65 percent may look like an attractive opportunity to some people, but in reality the constant concern of political uncertainty will keep this market thin," agreed Fernandez at J.P. Morgan.
Late in Asian trading, the U.S. dollar was trading at 11,100 rupiah, up just a fraction from 11,088 rupiah late Tuesday.